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Bottom-up Estimating: Definition, Pros and Cons

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19th Feb, 2024
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    Bottom-up Estimating: Definition, Pros and Cons

    Delving into a new project is a difficult ball game. It involves several steps, like estimating the duration of each project and the costs associated with it. By involving them from the beginning, bottom-up estimating fosters teamwork and dedication among the project team members.

    The bottom-up approach is one of the most accurate methods of estimating a project’s costs and timelines. In this article, we will discuss the bottom-up approach of estimation in detail. The task of estimation is entrusted to project managers. If you want to take Project Management Professional (PMP) certification should be your go-to course.

    What is Bottom-up Estimating in Project Management?

    As evident from the name itself, ‘bottom-up’ estimating in project management implies the method of estimation of project duration by adding up the lower-level aspects of the work breakdown structure. This has been reiterated by the definition of bottom up estimating pmbok. This method enables you to estimate the project's costs and time skillfully as it considers estimates from the most granular level i.e. at the work packages (or even activities) level of the Work breakdown structure.

    Incorporating this method into project management enables managers to have a clearer picture of all the elements of any project much earlier. Bottom-up estimation is regarded as more accurate than most other methods because it uses every known factor to evaluate the project's demands. A bottom up estimating PMP course should be your ultimate choice to become a project manager.

    Bottom-up Project example

    Bottom-Up Estimating Examples

    Here is an illustration of the bottom up cost estimation example in project management:

    Imagine that you have been requested to estimate the cost of an office construction project. The bottom up estimating formula is simple. You will have to simply divide the project into different phases. You can easily calculate the project's cost using the bottom up estimation technique.

    The phases include preparation of the site of construction, resource acquisition, construction of the building, and finally handing over the building to the company are the stages of the project. When you reach the activity level, you will assess the available resources, calculate the cost, and estimate how long each task will take.

    When you reach the activity level, you will assess the available resources, calculate the cost, and estimate how long each task will take. After that, sum together all of these figures to determine the overall cost and time required for the job. Since the project team accepted the risk, they are now able to go forward, respond quickly and effectively to market demands, and do so.

    Bottom-up estimating incorporates every project team member in the estimation process; as a result, it fosters stronger team commitment than other estimating methodologies. The bottom up decision making is also more reliable compared to other methods. Take Project Management courses online to be an efficient project manager.

    Bottom-up Estimating vs Top-down.

    As already mentioned, Bottom-up estimating is the overall approximation of value by estimating values for smaller components and using the sum of those values. Whereas top-down estimation in project management refers to the method of first assessing a project or budget as a whole before breaking it down into smaller parts. You can learn more about bottom up estimating PMI online through several certification courses. Below are the differences between Bottom-up and Top-down approaches:

    Bottom-up Estimating vs Top-down Approach

    Bottom Up ApproachTop Down Approach
    Bottom up estimating enables teams to calculate the time needed to complete each subtask. A total time estimate for the project's completion is then calculated using this time.The top-down approach estimates how long the project will take overall and divides it into its component tasks.
    Convenient for estimates with more details.Convenient for an overall estimate.
    Clear demarcation of tasks.Tasks are not clearly defined.
    More reliable estimates of time and costs.Less reliable estimates of time and costs.

    Apart from the bottom up estimation vs the top down estimation method, comparisons can be made between bottom up estimating vs parametric estimating, which is another popular way of estimation. When estimating activity factors like cost, budget, and timelines, the parametric approach of estimation makes use of a statistical link between historical data and other variables.

    How To Use Bottom-up Estimates in Project Management?

    1. Create a Work Breakdown Structure

    Divide the project into its smallest components before deciding upon an approach of estimation. The bottom-up estimating technique in project management focuses on estimating the project at each detail. As soon as the Work Breakdown Structure is set up, assign the various tasks to the team members, making it clear who will be in charge of each one.

    To calculate the precise amount of time and money required to complete all of these jobs, make sure that they are broken down to the smallest possible levels.

    2. Create a List of Resources and Timeline

    Define the resources necessary for executing the project and its timeline. Set a realistic timeline that will be easy to achieve. This will easily happen when you use the bottom-up cost estimation and the bottom up budget process. Break down the entire project into finer components to achieve the best outcomes.

    Decide how many individuals and what skill sets are most suited for each work, as well as any equipment that will be required. To improve the strategy, consult with each of them and make sure your assumptions are correct.

    3. Delegation of Work

    The third step is to delegate work effectively. As a project manager, you will have to ensure that everyone on the team shares responsibility instead of turning to you for every little problem. The project manager is simply to be mindful of delegating work effectively. They do not have to understand every aspect of this system or even be knowledgeable about all the technology involved. The project manager has to take feedback from time to time from each team and take their assistance during any difficulty.

    The manager gives each team member the authority to be accountable for the accomplishment of the tasks they are given, doing whatever is necessary to complete them despite any obstacles.

    4. Aggregation

    You should add up all of the estimates to determine the totals for each deliverable after estimating the lower-level packages in your WBS, identifying all necessary resources, and documenting task dependencies.

    The information on each job package’s price and the total number of days will be provided. These could be added up to determine the total project estimate.

    You can use this approach to identify the activities related to the project, the compilation of it, and the estimation of the work input for high-level deliverables. This approach is undeniably the best approach to obtain scheduling data for larger work packages.

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    Bottom-up Estimating Advantages and Disadvantages

    Here are the bottom up estimating advantages and disadvantages listed below:

    Advantages of Bottom-up Estimating

    1. Bottom-up estimating project management provides a better understanding of project components. It allows team members to take responsibility for their job and ensure that all elements of your project have been considered. Bottom-up estimation allows a manager to gain a more comprehensive understanding of the work package and identify potential barriers along the way.
    2. The overall risk for each project phase reduces with the use of this method. The manager becomes well-equipped with the issues from the start and uses team members' best suited to their expertise, allowing them to be flexible enough to modify according to the needs of the project utilizing the bottom up estimating in project management.
    3. Estimation errors can be spread among various parts of a project.  If one work package's time or cost is underestimated, this could be countered by an overestimation of another work package. As a result, such inaccuracies may have no effect on the project's financial baseline. This is only possible with a bottom-up estimation technique in a project.
    4. A manager can make smarter decisions and avoid costly mistakes by estimating the job package ahead of time. It also helps to avoid unpleasant shocks down the road. Even though the strategy requires a significant time investment upfront, the assumption is that it will save time in the long run.
    5. The bottom up estimating benefits include using the bottom up estimation method can increase a team’s autonomy and productivity. This results in an increase in the efficiency of the team members.

    Reasons for using Bottom-up estimating techniques

    Disadvantages of Bottom-Up Estimating

    1. The additional labor that may be done beyond the tasks listed in the activities, such as overhead and integration efforts, is frequently disregarded. These factors must be taken into consideration for large-scale, complex projects and cannot be disregarded.
    2. Bottom up estimation method requires a significant investment of time. This is particularly not feasible for projects with shorter deadlines.
    3. The potential for cost overruns is one of bottom-up budgeting's main drawbacks. This is due to the fact that all costs are projected at the beginning of the process, and there is always a chance that some of them will be understated. This also results in projects being underfunded.
    4. Not all companies may be able to implement bottom-up budgeting. This is due to the fact that it necessitates a certain degree of coordination and cooperation between several departments.
    5. Bottom-up estimation approach in software engineering may be subject to the estimators' bias or personal agendas. This is because numerous estimators, or individuals in charge of a certain work package, typically perform these estimations.

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    Conclusion

    Having accurate estimates is crucial to creating a reasonable timeline for seamless delivery. In some cases, the optimum estimating strategy mixes top-down and bottom-up methodologies, utilizing each as necessary to maximize its advantages and reduce its disadvantages. However, the bottom-up estimation in project management is typically more accurate.

    Learning this method and its related course could open various paths for a bright career. Bottom up estimation in software engineering is also significantly important if you want to shift to a managerial role after your engineering degree. Pursue this degree to get exposed to a host of new work opportunities irrespective of the field you belong. Learning all this will be easier with KnowledgeHut Project Management Professional (PMP) certification.

    Frequently Asked Questions (FAQs)

    1. How do you do bottom-up estimating?

    Bottom-up estimation is done by adding up the lower-level aspects i.e., work packages or activities of the work breakdown structure.

    2. How accurate is bottom-up estimating?

    Bottom-up estimating is typically more accurate compared to top-down estimating.

    3. What are the 3 different ways to estimate the project?

    The three major important ways of project estimation are the top-down approach, the bottom-up approach, and the parametric approach.

    4. What is the difference between analogous and bottom-up budget estimation?

    As already discussed analogous estimation or top-down estimation differs from bottom-up estimation on a fundamental level. The top-down approach is about estimating how much and how long the project will take overall and dividing it up into its component tasks. Whereas, the bottom up approach cost estimation enables teams to calculate the costs associated with the project and the time needed to complete each subtask. A total budget estimate for the project's completion is then calculated using this time and cost.

    5. What is the bottom-up approach in project management?

    Bottom-up estimating refers to the process of estimating work at the lowest degree of detail. It is more time taking but more accurate than all other methods of estimation.

    Profile

    Kevin D.Davis

    Blog Author

    Kevin D. Davis is a seasoned and results-driven Program/Project Management Professional with a Master's Certificate in Advanced Project Management. With expertise in leading multi-million dollar projects, strategic planning, and sales operations, Kevin excels in maximizing solutions and building business cases. He possesses a deep understanding of methodologies such as PMBOK, Lean Six Sigma, and TQM to achieve business/technology alignment. With over 100 instructional training sessions and extensive experience as a PMP Exam Prep Instructor at KnowledgeHut, Kevin has a proven track record in project management training and consulting. His expertise has helped in driving successful project outcomes and fostering organizational growth.

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